Big Drop in Chinese Stock Market and an Unresolved Greek Debt Crisis

June 26, 2015

Equities slumped 7.9% in China, 2.3% in Hong Kong, 1.5% in Australia, 0.9% in Singapore but fell just 0.3% in Japan.

Greece dominates today’s meeting of eurozone finance ministers, which will be followed by a 2-day summit of EU leaders.  The Greek government never resubmitted a revised reform plan, after Monday’s offering was rejected by the IMF, ECB, and EU creditors.  Market chatter about the stalemate is rather cavalier.  Like all such negotiations, the expectation all along has been that negotiators will blink at the last minute and avoid complete chaos.  Such miscalculations are how wars start.

Equities in Europe are down 0.9% in Switzerland but only  0.3% in Great Britain, Germany, Spain and Italy, 0.2% in Greece and 0.1% in France.

The dollar rose overnight by 0.6% against the New Zealand and Australian dollars but fell 0.5% vis-a-vis the Swiss franc and 0.2% relative to the yen.  The dollar is unchanged against the euro, yuan and sterling and has edged 0.1% upward versus the loonie.

Ten-year sovereign debt yields are unchanged in Germany and Japan and two basis points lower in Britain.  Spreads between Germany on the one hand and Spain, Italy and Greece on the other hand have widened somewhat.

Comex gold edged up 0.1% to $1,174.27 per ounce, while WTI crude oil dipped 0.3% to $59.51 per barrel.

Japanese total and core inflation slowed in May to 2-year lows of 0.5% and 0.2%.  The deceleration was less than expected, as energy and food rose 0.6% on month.  Tokyo consumer prices in June sank 0.4%, reducing the on-year rate of increase by 0.2 percentage points to 0.3%.  From May to June, energy plunged anew by 2.2%, and food costs dropped 0.8%.

Japanese labor statistics showed an unchanged 3.3% jobless rate in May, lowest since April 1997.  The jobs-to-job seekers ratio rose by 0.02 points for a second straight month, reaching 1.19, but employment was unchanged from May 2014.

Japanese real household spending rose 2.4% on month and 4.8% on year in May.  That was the strongest result since March 2014.Income grew 1.5% between May 2014 and May 2015.

German import prices fell on month by 0.2% in May, the first decline since January.  This increased the on-year rate of import price decline to 0.8% from 0.6% the month before.  Energy increased 0.8% but posted a 21.2% drop from May 2014.  Export prices also dipped 0.2% on month but rose 1.4% on year in May.

Eurozone money and credit statistics showed

  • Slower on-year M3 money expansion of 5.0% in May versus 5.3% in April due to a big slowdown in the growth of marketable instruments (M3-M2) to 5.0% from 11.9%.
  • M3 on-year growth in March-May of 5.0%, up from 4.7% in February-April and 4.1% in the first quarter.
  • A return to positive on-year growth in private loans (0.5%) and private credit (0.2%).  Mortgage lending accelerated to 1.4% from 0.1%, but loans to non-financial firms remained in the red with an on-year dip of 0.3%.

The volume of Swedish retail sales dipped 0.1% in May, trimming the 12-month rate of increase to 3.9%.  Sweden had an SEK 2.3 billion trade surplus in May versus an SEK 1.6 billion deficit in May 2014, as imports sank 3.5% while exports firmed 0.6%.  In January-May, the SEK 17.7 billion surplus was 73.5% wider than a year earlier, as export growth of 4.3% exceeded the 2.7% year-to-date increase in imports.

French consumer sentiment posted a reading of 94 for a third straight month in June.  The survey highlighted mounting disinflationary price expectations.

Italian consumer confidence improved 3.5 points to a 3-month high of 109.5 in June.  Business sentiment went up 2.5 points to 104.3.

Finnish retail sales fell 3.6% in the year to May following a 2.9% on-year decline in April.  Icelandic consumer prices firmed 0.3% in June, depressing the on-year pace to 1.5% from 1.6% in May and 2.2% in June 2014.

New Zealand experienced an NZD 350 million trade surplus in May, which was about twice the size of April’s surplus and not the deficit that analysts had been projecting.  An NZD 2.57 billion deficit over the past twelve reported months was marginally less than that in the previous statement year.

Industrial production in Singapore fell 2.3% between May 2014 and May 2015 and increased 2.4% compared to April. 

The Reuters/U. Michigan index of U.S. consumer sentiment will be reported later today.  Kansas City Fed President Esther George speaks publicly.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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